MW The first major stock index just fell into correction territory. Will others follow?
By Joseph Adinolfi
Small-cap stocks have been hit hard by this oil-shock selloff
U.S. stocks just wrapped up another rough week, leaving small caps in a correction and other indexes closer to it.
U.S. stocks finished sharply lower on Friday, as investors wrapped up another bruising week.
Seeing few signs that the Iran conflict was nearing its conclusion, many investors appeared unwilling to carry risk into the weekend for fear of further escalation.
By the time the dust settled, the Russell 2000 RUT had closed in correction territory, defined as a drop of 10% or more from a recent high. The small-cap index, which had been riding high until recently, has seen a dramatic turnaround since the U.S. and Israel first attacked Iran in late February.
The last time the Russell 2000 entered correction territory was in January 2025. It later fell into a brief bear market following President Trump's "liberation day" tariff announcement, which briefly rocked global financial markets nearly a year ago.
For a moment Friday, it also looked like the Nasdaq Composite COMP would finish in correction territory. But the tech-heavy index pared some of its losses heading into the close. It still finished down 2%, its biggest daily percentage-point drop since Feb. 12, FactSet data showed. The Nasdaq is now 9.7% below its record close from four months ago.
Stock-market pain intensified in afternoon trading as crude-oil prices pressed higher. President Trump told a group of reporters outside the White House that he would oppose a cease-fire with Iran, but that Israel likely would agree to end the fighting when the U.S. decides it is time. The Pentagon sending more troops to the region appeared to spook the market Friday.
"Investors had been hopeful for a quick end to the hostilities," said Steve Sosnick, chief strategist at Interactive Brokers, noting that a pivot by Trump or simply capitulation by the Iranian regime would be equally welcome. But with "all the damage in the region, things aren't likely to get back to normal anytime soon," he told MarketWatch.
Brent crude (BRN00), the global benchmark, finished the week above $110 a barrel for the first time since 2022, Dow Jones Market Data showed. As hopes for de-escalation faded, the major indexes, including the S&P 500 SPX, tallied a fourth week in the red.
"The pessimists and oil experts are increasingly in control as the war in Iran drags into its fourth week and dreams of a rapid bomb-and-run campaign evaporate," said Brent Donnelly, the president of Spectra Markets, in commentary shared with MarketWatch.
Technical indicators suggest support for stocks has started to weaken. The S&P 500 finished below its 200-day moving average on Thursday, snapping a run of 214 trading sessions above it.
See: Here's what happens after the S&P 500 breaks under the 200-day moving average following a long run
Across Wall Street, more strategists appeared to be bracing for the S&P 500 and Dow Jones Industrial Average DJIA to join the Russell 2000 in correction territory.
Ed Yardeni, founder and president of Yardeni Research, said earlier this week that he expects the Iran war will lead to a pullback of between 10% and 15%. Such an outcome would be a great buying opportunity, he said.
Hedge funds appeared to be behind much of the selling this week, according to written commentary from Goldman Sachs. A Goldman trading-desk strategist said that long-only hedge funds dumped $9.6 billion in stocks on a net basis on Thursday, the most on record going back to 2022.
"It feels to many like that lazy period going into COVID and Russia's most recent invasion of Ukraine in 2022, where the majority of traders and investors are more afraid of missing the rally than hedging for the dump," Donnelly at Spectra said in written commentary.
Internals within the S&P 500 have also weakened dramatically, suggesting that the index is in a more precarious place. Only 18% of S&P 500 stocks finished Friday above their 50-day moving average, the lowest percentage since April 21, Dow Jones Market Data showed.
The S&P 500 finished the week down 1.9%, its worst showing since the week ended March 6. It closed on Friday at 6,506.48, its lowest level since September. The Nasdaq fell 2.1% this week, the most in a week since Feb. 13. The Dow was down 981 points this week, or 2.1%, to 45,577.47.
-Joseph Adinolfi
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 20, 2026 17:18 ET (21:18 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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